McKinsey: Deferred Prosecution and Corporate Accountability
McKinsey & Company, a global management consulting firm headquartered in New York, entered into a deferred prosecution agreement (DPA) and civil settlement with federal prosecutors in Boston and the Western District of Virginia related to its work on behalf of Purdue Pharma L.P., a prominent manufacturer of opioids like OxyContin. The DPA accompanied an Information charging McKinsey with misdemeanor misbranding and felony obstruction. In addition, a partner at McKinsey, Eric Elling, agreed to plead guilty to obstruction of justice for conspiring to destroy relevant documents. As part of its settlement, McKinsey has agreed to pay approximately $650 million in fines, penalties and restitution.
As many know, Purdue entered into a criminal settlement with the Government in 2020. The charging documents filed by the Government reveal McKinsey's substantial role in advising Purdue on strategies to increase opioid sales, despite obvious awareness of the opioid crisis's devastating impact.
Dynamis’ Quick Takes
First, the Deferred Prosecution Agreement (DPA) granted to McKinsey & Company underscores a trend in corporate accountability where certain large firms deemed "too big to fail" are shielded from federal prosecution. By allowing McKinsey to avoid a criminal conviction for its role in the opioid crisis, this DPA exemplifies how large, influential corporations can leverage their size, resources, and perceived economic importance to secure lenient outcomes. Unlike smaller entities or individuals (many of whom are Dynamis clients) who often face immediate prosecution and conviction for far lesser offenses, McKinsey, a firm with vast global influence and resources (annual revenues of approximately $16 billion), receives a deferred resolution, paying fines that are significant on paper but ultimately negligible compared to its revenues and profits. This approach raises serious concerns about the equity of justice and whether the law truly applies equally to all.
Notably, the McKinsey DPA starkly contrasts with the treatment of other entities and individuals involved in similar scandals. For example, smaller pharmaceutical companies implicated in the opioid crisis, such as Insys Therapeutics, were forced into bankruptcy after the company’s operating subsidiary (and some executives) faced criminal convictions. [Insys’ operating subsidiary pled guilty, while the company itself entered into a DPA]. Purdue Pharma itself declared bankruptcy and accepted a guilty plea for its misconduct. Yet, McKinsey—the architect of Purdue’s opioid strategy—was spared similar consequences despite its conduct, which included knowingly exacerbating addiction risks and destroying evidence to obstruct justice. The DPA sends a message that McKinsey is too large and essential to disrupt, prioritizing the firm’s survival over justice.
Second, it is unclear why the Government is directing all the civil settlement money, including restitution, to itself. The entire point of McKinsey’s conduct is that it allowed Purdue to ramp up its unlawful distribution of opiods. Much of the havoc was inflicted on rural communities in the MidWest and South. Certainly, the Government could have directed the funds to public health agencies in those communities. Instead, the money is being directed to the US Treasury.
Third, the attorneys drafting the charging papers appear to have gone out of their way to protect McKinsey executives. For example, the Statement of Facts repeatedly uses the name “McKinsey” when describing sending and receiving proposals or emails, but seldom, if ever, uses the names of the actual people engaged in the communications. Instead, names such as “McKinsey Senior Partner 2” or “McKinsey Consultant 1” are employed.
Key Allegations Against McKinsey Consulting:
A. Misbranding and Aggressive Opioid Marketing (USA v. McKinsey - Information & Agreed Statement of Facts)
Scope of Engagements: Between 2004 and 2019, McKinsey engaged in 75 projects with Purdue Pharma, earning approximately $93.5 million. These projects included strategies to "turbocharge" opioid sales and manage damage to Purdue's reputation as legal scrutiny increased.
“Evolve to Excellence” (E2E): McKinsey developed and implemented strategies like the "Evolve to Excellence" campaign to increase OxyContin sales. This involved targeting high-prescribing doctors, even in areas significantly affected by opioid addiction.
Encouraging Prescriptions Despite Risks: McKinsey knowingly advised Purdue to intensify marketing efforts to healthcare providers already prescribing large amounts of OxyContin, contributing to the opioid epidemic.
B. Failure to Address Ethical Risks
McKinsey consultants worked closely with Purdue Pharma leadership, including members of the Sackler family, the owners of Purdue. They provided strategic advice on combating generic competition and mitigating regulatory challenges.
McKinsey overlooked or downplayed risks associated with its recommendations, including potential harm to patients and the public.
C. Document Destruction and Obstruction of Justice (USA v. Elling)
Martin Eric Elling’s Role: A senior McKinsey partner, Elling, was instrumental in many Purdue projects. He directed McKinsey teams advising Purdue and played a key role in strategic decisions.
Document Deletion: Elling emailed colleagues suggesting the deletion of documents related to Purdue following lawsuits against Purdue executives. Forensic analysis later revealed that he removed files related to Purdue from his McKinsey-issued laptop.
Obstruction of Justice: This document deletion occurred amidst growing investigations into Purdue's role in the opioid crisis, obstructing federal probes. Elling pled guilty to felony obstruction of justice in the Western District of Virginia.
D. Misleading the FDA (Civil Settlement Agreement & Deferred Prosecution Agreement)
McKinsey had a dual role, consulting for Purdue Pharma and the FDA (Food and Drug Administration). While working on FDA projects like the Sentinel Initiative (monitoring drug safety), McKinsey assigned consultants who were simultaneously advising Purdue, a clear conflict of interest.
McKinsey misled the FDA about safeguards preventing consultants from working on competing projects.
Statement of Facts Highlights McKinsey’s Egregious Conduct
The Agreed Statement of Facts in the case against McKinsey & Company outlines a pattern of unethical and illegal conduct by the firm during its consulting work for Purdue Pharma, which manufactured and sold opioids like OxyContin. Below is a detailed analysis of the most egregious conduct committed by McKinsey, focusing on actions that directly contributed to the opioid epidemic and hindered justice.
1. Aggressive Marketing Strategies for OxyContin
Targeting High-Prescribing Doctors: McKinsey designed and implemented marketing strategies for Purdue to "turbocharge" sales of OxyContin by targeting the highest-volume prescribers, some of whom were in regions already ravaged by opioid addiction.
Egregious Aspect: McKinsey knew or should have known that focusing on these doctors could exacerbate the opioid crisis, yet it prioritized profit over public health
Example: The “Evolve to Excellence” (E2E) initiative emphasized strategies like segmenting physicians and targeting those with high prescribing rates, even in areas severely affected by opioid abuse.
"Dark Analytics" in Sales Strategy: McKinsey employed advanced analytics to increase Purdue's market penetration. This included identifying and optimizing prescribing behaviors using data from sales representatives.
Implication: McKinsey's sophisticated techniques magnified the reach and harm of Purdue’s sales campaigns.
2. Profiting from and Downplaying Known Risks of Opioids
Ignoring Known Risks: McKinsey was aware of the addictive nature of OxyContin and the devastating consequences of opioid misuse. Despite this, it actively worked to grow Purdue’s sales and revenue by countering efforts to restrict access to opioids.
Example: McKinsey supported efforts to minimize the impact of Purdue’s legal and regulatory challenges and provided advice on mitigating backlash from the public and regulators.
Egregious Aspect: This conduct underscores a willingness to exploit a known public health crisis for financial gain.
Monetizing Addiction: McKinsey’s advice extended to minimizing revenue losses as Purdue faced legal challenges. For example, McKinsey proposed financial measures to retain market share and boost opioid sales despite growing awareness of the epidemic.
3. Conflict of Interest and Misrepresentation
Consulting for Both Purdue and the FDA: McKinsey simultaneously worked for Purdue Pharma to promote OxyContin sales and for the Food and Drug Administration (FDA) on drug safety projects (e.g., the Sentinel Initiative).
Egregious Aspect: McKinsey misrepresented to the FDA that consultants working on its safety projects would not be involved in Purdue-related work. This failure to maintain proper firewalls undermined the FDA’s regulatory authority and trust in McKinsey.
Ethical Breach: McKinsey consultants advised Purdue on strategies to influence regulators, while advising the FDA on improving drug oversight. This dual role created a glaring conflict of interest that McKinsey failed to address.
4. Document Destruction and Obstruction of Justice
Deliberate Destruction of Evidence: In 2018, as legal scrutiny of Purdue intensified, senior McKinsey partners, including Martin Eric Elling, discussed eliminating documents related to the firm’s work for Purdue.
Examples:
Elling emailed a colleague suggesting a discussion with the risk committee "to see if we should be doing anything other than eliminating all our documents and emails."
He later sent himself a to-do list that included "delete old pur[Due] documents from laptop."
Forensic analysis confirmed that materials were removed from McKinsey laptops.
Egregious Aspect: This deliberate obstruction of justice occurred during ongoing investigations into Purdue, directly impeding efforts to uncover McKinsey's role in the opioid crisis.
5. Direct Involvement with Purdue’s Management
Collusion with the Sackler Family: McKinsey consultants regularly worked closely with Purdue's owners, the Sackler family, and senior executives to develop sales strategies and damage control measures.
Example: McKinsey advised on strategies to protect Purdue from the fallout of lawsuits and investigations, including potential public relations approaches to preserve the company’s reputation.
Egregious Aspect: By working hand-in-hand with Purdue’s leadership, McKinsey became a central player in facilitating the company’s harmful practices.
6. Manipulating Regulatory Processes
Exploiting FDA Approvals: McKinsey assisted Purdue in promoting OxyContin’s abuse-deterrent formulation, emphasizing the product’s supposed safety improvements. At the same time, it strategized ways to counteract the negative publicity surrounding opioid addiction.
Egregious Aspect: These actions reveal a pattern of manipulating regulatory processes to enhance Purdue’s marketability while ignoring the broader societal costs.
7. Historical Awareness of the Opioid Crisis
Knowledge of Public Health Impact: As early as the 2000s, public reports from agencies like the DEA and FDA highlighted the dangers of OxyContin and Purdue’s marketing practices. McKinsey not only ignored these warnings but actively worked to amplify Purdue’s sales.
Egregious Aspect: McKinsey had decades of awareness about the harm its strategies could cause, yet it chose to support Purdue’s objectives for profit.
Summary of Egregious Conduct
Amplifying Addiction: McKinsey knowingly developed strategies that increased OxyContin sales, targeting high-prescribing doctors and vulnerable communities.
Suppressing Accountability: McKinsey destroyed documents and obstructed investigations, shielding its role in the opioid crisis.
Ethical Violations: McKinsey breached its ethical obligations by consulting for both Purdue and the FDA, misleading the latter about safeguards to prevent conflicts of interest.
Complicity in a Crisis: McKinsey played a direct role in facilitating Purdue’s actions, earning substantial profits while exacerbating a nationwide public health emergency.
In short, the Statement of Facts reveals McKinsey’s deep complicity in the opioid crisis, showing a pattern of reckless, profit-driven behavior that prioritized corporate interests over public safety. Its actions were not merely unethical but actively harmful, enabling Purdue Pharma to fuel one of the most devastating public health crises in modern history.
Government Settlement Agreements with McKinsey:
There were two main settlement agreements. A civil settlement to settle civil claims brought by the Government, and a Deferred Prosecution Agreement brought by Information.
1. Civil Settlement Agreement
McKinsey agreed to pay $323 million, including $109 million in restitution, to settle civil claims arising from its actions. This included misleading the FDA and advising Purdue to intensify opioid marketing. Notably, the restitution framework in these agreements focuses on compensating federal programs for financial losses rather than providing direct relief to individuals, families, or communities devastated by opioid addiction. Unlike other opioid settlements that have directed funds to public health initiatives or addiction treatment programs (e.g., Purdue Pharma's bankruptcy settlement), McKinsey’s restitution appears limited to reimbursing government payers.
This narrow scope has been criticized as insufficient given the human cost of the opioid epidemic and McKinsey's role in exacerbating the crisis. Let me know if you'd like more analysis on this aspect.
2. Deferred Prosecution Agreement (DPA)
McKinsey admitted to its role in misbranding opioids and obstructing justice, agreeing to pay $650 million over several years. Conditions included:
Ceasing all work related to controlled substances.
Implementing enhanced compliance and ethical standards.
Continuing cooperation with federal investigations into other parties.
Many people do not know what a Deferred Prosecution Agreement (DPA) is. A DPA is a legal agreement that allows McKinsey to avoid criminal prosecution for certain offenses (including misbranding of prescription drugs and obstruction of justice) if it complies with the terms outlined in the agreement. In short, it allows McKinsey to escape criminal charges altogether if it stays out of trouble. Notably, McKinsey has not stayed out of trouble. As the DPA provides:
MCKINSEY has no prior history of similar misconduct, but (i) McKinsey Inc. entered into civil settlements in 2019 and 2020 with the U.S. Trustee Program to resolve a dispute regarding the adequacy of McKinsey Inc.’s disclosures in connection with certain bankruptcy cases; (ii) a subsidiary of McKinsey Inc., MIO Partners, Inc., agreed in 2021 to pay a civil penalty to the U.S. Securities and Exchange Commission to resolve allegations that it had failed to maintain internal controls reasonably designed to prevent the misuse of material, non-public information; and (iii) a subsidiary of McKinsey Inc., McKinsey & Company Africa (Pty) Ltd, entered into a deferred prosecution agreement on December 5, 2024, regarding violations of the Foreign Corrupt Practices Act;
In short, this is a common concern with these get-out-of-jail too-big-to-fail agreements with the Government, which is typically afraid of bringing charges against large companies. This is not even McKinsey’s first DPA. Rather, it had already entered into a FCPA DPA just weeks earlier. Bad behavior goes unchecked as McKinsey knows it will not be criminally prosecuted.
Key Features of the McKinsey DPA
1. Charges Deferred
McKinsey is charged with two main offenses, but prosecution is deferred:
Count 1: Conspiracy to aid and abet the misbranding of prescription drugs (OxyContin), violating 21 U.S.C. § 331(k) and related statutes.
Count 2: Destruction and concealment of records to impede and obstruct federal investigations, violating 18 U.S.C. § 1519.
The government agrees not to prosecute McKinsey if it adheres to the agreement’s terms during the five-year term.
2. Admissions and Acknowledgment of Responsibility
McKinsey acknowledges and admits to the facts and allegations in the Agreed Statement of Facts and the Information document.
It accepts responsibility for its role in aiding Purdue Pharma’s aggressive opioid marketing and the obstruction of justice.
3. Financial Penalties
McKinsey will pay $650 million in penalties, including criminal fines, restitution, and forfeiture of proceeds, allocated as follows:
$323 million for civil claims.
$231 million in criminal fines.
$93.5 million in forfeited proceeds.
$2 million to the Virginia Medicaid Fraud Control Unit.
4. Compliance and Cooperation Requirements
As part of the DPA McKinsey must:
Stop opioid-related work: McKinsey cannot engage in the marketing, sale, or promotion of controlled substances during the agreement’s term.
Strengthen compliance: Implement enhanced compliance measures, including ethics training, client intake reviews, and independent audits of its compliance program.
Certify compliance annually: The managing partner must submit annual certifications to DOJ affirming compliance with the agreement and federal laws.
Cooperate with investigations: Provide full cooperation in ongoing investigations and prosecutions of individuals or entities related to opioids or obstruction of justice. This includes securing employee testimony and providing requested documents.
Penalties Facing McKinsey
A. Deferred Prosecution Agreement (DPA)
Total Penalty: $650 million, including:
$323,020,647.75: Payment to settle civil claims, plus interest at 4.125% annually starting July 10, 2024.
$231,432,853.25: Criminal fine, plus interest at 4.34% annually starting December 1, 2024.
$93,546,499: Forfeiture of criminal proceeds, plus interest at 4.34% annually starting December 1, 2024.
$2 million: Payment to the Virginia Medicaid Fraud Control Unit for state Medicaid fraud prevention.
B. Civil Settlement Agreement (USA v. McKinsey - Civil Settlement)
McKinsey agreed to pay $323,020,647.75, of which $109,370,963.40 is restitution to federal healthcare programs like Medicare, Medicaid, and TRICARE.
These payments address claims of fraudulent or false submissions for reimbursement tied to McKinsey's work for Purdue Pharma.
C. Business Restrictions
McKinsey is prohibited from engaging in work related to the marketing, sale, promotion, or distribution of controlled substances (e.g., opioids) during the five-year term of the DPA.
Enhanced compliance and client-selection processes must be implemented to prevent future unethical practices.
D. Compliance Obligations
McKinsey must establish robust compliance measures, including:
Regular training for employees on ethics and compliance.
Audits and risk monitoring.
Independent third-party reviews of compliance programs.
Annual certifications by the managing partner are required to confirm adherence to the agreement and federal laws.
E. Admission of Responsibility
McKinsey admitted to the facts in the "Agreed Statement of Facts," acknowledging its role in misbranding prescription opioids and obstructing justice.
F. Specific Criminal Charges:
Count One: Conspiring to aid and abet the misbranding of prescription drugs.
Count Two: Knowingly destroying and concealing records to impede federal investigations.
G. Restitution and Forfeiture
Restitution: $109 million as part of the civil settlement to reimburse federal healthcare programs affected by McKinsey’s actions.
Forfeiture: $93.5 million representing criminal proceeds
Was This An Appropriate Resolution By McKinsey?
No doubt, McKinsey was let off easy. McKinsey is a massive consulting company employing tens of thousands of employees worldwide. It has now officially been deemed too big to fail. McKinsey was allowed to defer any prosecution and avoid a felony conviction. It was allowed to buy its way out of any penalty with teeth. Notably, this was allowed to happen even though McKinsey’s cooperation with the Government was lackluster (at best). This resolution highlights the gulf between smaller companies and bigger companies in the United States. Once companies are too big to fail, they cannot be charged. The conduct engaged in was egregious, and just a single McKinsey partner was punished with a charge.
